Monthly Treasury Average Index - MTA Index

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DEFINITION of 'Monthly Treasury Average Index - MTA Index'

The 12-month moving average of the one-year constant maturity treasury (CMT) used as an index for adjustable rate mortgages. The index is calculated by adding the 12 most recent monthly CMT values and dividing by 12. Since the MTA index is a moving average it has a lag effect. In other words, when the 12 monthly CMT values used to calculate the average are sequentially increasing, the current MTA value will not be as high as the current CMT value, and visa versa when the CMT values are sequentially falling.

BREAKING DOWN 'Monthly Treasury Average Index - MTA Index'

Some mortgages, such as payment option arms, offer the borrower a choice of indexes. This choice should be made with some analysis. The interest rate on an adjustable rate mortgage is known as the fully indexed interest rate - it equals the index value plus the margin. While the index is variable, the margin is fixed for the life of the mortgage. Different indexes have relative values which historically are quite constant within a certain range. For example, the MTA index is typically lower than the one month LIBOR index by about .1% to .5%. When considering which index is most economical, don't forget about the margin. The lower an index relative to another index, the higher the margin is likely to be.

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